Dangerous stagnation

As we shuffle toward elections in the familiar fog of scandals, insults, threats and lies, the picture of the real economy ought to wake politicians and citizens to the magnitude of the country’s problems. Without investments, without substantial reforms, without solving chronic problems, the economy will not escape the quagmire. We may even slip back into recession.

Regarding Greece’s largest companies, the title of a major PricewaterhouseCoopers report, released on Thursday, says it all: “10 Years of Crisis: Smaller but Unreformed Corporate Economy.” It noted the resilience of companies but also the heavy cost of a crisis that undermined potential and did not lead to the solution of old problems.

The fact that only one of the top 10 companies of 2008 has disappeared (Marinopoulos) shows that on the surface little has changed. However, the size of the average company is smaller and economic activity has shifted toward sectors with lower added value, such as tourism and industry. To deal with lower demand, companies reduced operating costs by 11 percent and investments by 57 percent. They survived but did not develop adequately.

Another sign of dangerous stagnation is that 26 percent of the companies that survived the crisis are in the category of those that cannot meet their loan obligations or debts to third parties. Significantly, 312 of today’s 745 “zombies” were already in this state in 2008. Even as the crisis raised the cost of capital, these companies tied up capital that could be used by healthy companies that they were competing against, distorting the market.

“The legacy of the crisis is heavy, but well hidden, and gradually is forming Greece into a more primitive physical production base with less services output, fed with little investment and starved of innovation,” the PwC report concludes.

This picture is complemented by a report by the confederation of small businesses (GSEVEE) on Wednesday, which found that the number of small- and medium-sized companies fell by 28.36 percent from 2008 to 2016, whereas large companies expanded their share of the market from 6.04 percent to 10.51 percent.

With the Foundation for Economic and Industrial Research (IOBE) estimating growth in 2019 at 2 percent or lower, there is a danger of Greece slipping back into recession, with all that this would entail for employment, emigration and servicing the public debt. Unless production is encouraged, unless there is a climate favorable to major investments, we risk losing more than we have already lost. It is time to get rid of the zombies in politics, too.